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European Public Broadcasters' Crisis: Spain’s RTVE Cuts Back on Hollywood

The first in a THR series about the challenges of big European public broadcasters looks at Spain’s once-mighty Radio Television Espanola.

MADRID -- Once Spain's undisputed broadcast titan, which wielded power in programming thanks to having the lion's share of output deals with the Hollywood majors, the country's national public broadcaster, Radio Television Espanola (RTVE), has been teetering on a razor's edge.

Just a few years ago, RTVE was one of the studios’ best friends in Europe thanks to pricey, multiyear exclusive output deals with the likes of Warner Bros. Television, Universal, Paramount and Sony. But the Warners deal is history, and Universal’s agreement expired last month.

Meanwhile, Sony, which signed its most recent deal with RTVE in 2011, is currently in preliminary talks for upcoming titles. RTVE is believed to be negotiating sponsorship deals to cover part of the cost of the Sony deal. The network's Paramount deal, so far at least, does not appear under threat though.

While Spain’s commercial networks have stepped into the gap and snapped up most of the available movie output deals, the collapse of the country’s advertising market does not bode well for future licensing fees going to Hollywood.

Meanwhile at RTVE, the cuts keep coming. The public broadcaster snipped $31 million out of its 2013 budget after losing $146 million last year and $38 million in 2011.

The Spanish broadcaster has cut its management team by 25 percent, trimmed its administrative council from 12 to nine members, imposed a 12 percent overall cost reduction for general services and slashed its programming budget. To fill the budget gap, RTVE has also put 29 real estate properties -- including its flagship Bunuel Studios in northern Madrid -- on the auction block in a move that could bring in more than $250 million.

It's a similar story among Spain’s regional public broadcasters. Madrid’s Telemadrid fired 829 employees at the beginning of this year. In the northeastern Catalan region, the local public broadcaster announced 312 layoffs with a salary cut for the remaining staff.

In the midst of nationwide austerity, voices are growing louder that Hollywood also has to share Spain’s pain - a call also seen in other European countries.

"The majors are going to have to realize that the Spanish market has changed a lot," a source at RTVE told The Hollywood Reporter. "The serious economic situation has forced an adjustment in the sector that the American companies haven't experienced. But the time has come for each party to assume its responsibility to make the TV sector a viable market."

In 2010, as the full impact of the global economic crisis was beginning to be felt in Spain, the government in Madrid banned commercials during movies and other programming on public broadcasters, hoping the ad revenue would shift to the nation’s ailing commercial networks.

Spanish Treasury Minister Cristobal Montoro now admits that the move (by a previous government) was a "mistake." He’s called on all parties to "find a viable financing" model and has promised to find an additional $37 million through new sponsorship deals and advertising to boost RTVE’s budget.

Unlike in Greece, where the government temporarily shut down its national public broadcaster to save money, there are no plans in Madrid to pull the plug on RTVE.

"Spain is nothing like Greece. The government of that country did what it considered appropriate, but we consider RTVE a necessary and unquestionable public service," said the spokesman for Spain’s ruling Popular Party, who sits on the parliamentary commission that oversees the broadcaster. "RTVE is going to continue, and we are going to fight to do more with less so that RTVE can continue to be a quality, objective pubcaster, without even one layoff."

But RTVE’s ills are many. A recent hike in Spain's sales tax from 18 percent to 21 percent and a revaluation of its real estate properties have added to its debt burden, forcing the broadcaster to take out a $90 million loan last year with Spanish banks Banco Santander and BBVA.

The fall in Spain’s ad market has also hit RTVE as part of its budget comes from a 1.5 percent cut of the total revenue of Spain’s commercial networks. That portion, around 5 percent of RTVE’s budget, has slipped as ad revenue has continued to fall nationwide.

Another revenue source for the public broadcaster is a national tax on telecoms that between 2010 and 2012 funneled $979 million to RTVE. But that is also set to drop after Vodafone canceled its Spanish VOD service, saying the RTVE tax, which Vodafone calculated at $65 million a year, made it impossible to make a profit. Spain’s telecom operators have joined their counterparts in France in lobbying the European Union to appeal the tax.

With less money to go around, there is increasing political pressure to spend public TV fees on domestic programming. Spanish producers have called on RTVE to spend its entire acquisition budget on homegrown product, such as period dramas Red Eagle and Isabel, and get out of U.S. films and series altogether.

The trend toward homegrown content had already been building for some time in Spain, and RTVE’s local dramas are ratings hits. Red Eagle drew an average of 5 million viewers an episode for a 25.2 percent share for its latest season, while the second season of Isabel, based on the life of Spanish queen Isabella I, snagged 4.6 million viewers and a 22.6 percent share. Red Eagle is set in 17th century Spain and focuses on a man who looks to avenge the murder of his wife as vigilante "Red Eagle."

Meanwhile, U.S. series, such as Two and a Half Men and Modern Family, are considered too niche for the mainstream Spanish market and instead turn up on more niche channels like Atresmedia's Neox, which cater to younger audiences.

For now, RTVE still reserves space in its schedule for Hollywood blockbusters. But until Spain’s economic crisis and its record 24 percent unemployment improve, Hollywood will have to get used to fewer and much smaller checks from the once-mighty Spanish broadcaster.